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Unit 8: Life Insurance

It is very difficult to prepare a list of all financial needs. But it can be divided into capital needs Notes
like emergency funds, education needs, marriage needs and income needs like family income,
retirement needs. Life Insurance has been recognized as one of the best instruments of family
financial program. Usually people look at investment in life Insurance as risk cover/investment,
combination of both the above, adequately long term, safe investment, moderate yield and tax
savings.
The need levels of individuals in Life Insurance naturally depend on the age group. Every one of
us has the following Insurance needs at every point of our life. But the degree of need depends
on age. The recognized needs are protection for self and family, children needs, retirement
needs, special needs like health and housing.
Several definitions of life insurance contract have been given from time to time by learned
persons, Judges and in the insurance legislation as under:
A contract of life insurance is that in which one party agrees to pay a given sum on the happening
of a particular event contingent upon the duration of human life, in consideration of the immediate
payment of a smaller sum or certain equivalent periodical payments by another.
– Bunion
Life Insurance contract may be defined whereby the insurer, in consideration of a premium paid
either in lump sum or in periodical instalments, undertakes to pay an annuity of a certain sum
of money either on the death of the insured or on the expiry of a certain number of years.

– R.S. Sharma
A contract of Life Assurance is that in which one party agrees to pay a given sum on the
happening of a particular event contingent upon the duration of human life in consideration of
the immediate payment of a smaller sum or certain equivalent periodical payments by another.
– Bunyon’s Law of Life Insurance
Life insurance business is the business of effecting contract upon human life.

- Insurance Act

Self Assessment

Fill in the blanks:
1. The …………………………………….. of life insurance are risk coverage and savings for
future.

2. ………………………………. planning has become more complex because of greater
economic uncertainty, constantly changing tax laws and varieties of options.

8.2 Life Insurance is a Scientific Concept

You must understand that life insurance is considered to be a scientific concept owing to the
following reasons:
1. Risk Sharing: Life Insurance means pooling of funds of people and meeting the loss of
those few who have met a mishap i.e. an early death. After the death of the bread-winner
of a family, the members of the family may be compelled to live a life of misery, but for
the insurance cover that comes to their rescue by providing money for sustenance, education
and growth.

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